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The

Federal Reserve Board.

Mr. Wyatt -

General Counsel.

X-6212

n8.,

~

January 4, 1929.

SUBJECT:

Report

to Senator Norbeck on

S-4662 f.or

signature of Secretary

of the Treasury.

I res·?ectfully submit herewith a draft of a le t ter for the signature of

Secretary of the Treasury to

Senator

Norbeck of the :Banking and CUrrency Com-

pf the

Senate, in

response to

a request

for

a

report

on S-4662, a bi l l

to

tpe Federal Reserve Act with

r ~ s p e c t to

venue

of civi l suits against

Federal

banks.

This

bi l l is

so inart ist ical ly and ambiguously drawn that i t is impos

clear;Ly

to

understand

i t s

purpose

or

effect.

In

view

of

the

fact,

hqwever,

1 t was introduced by Senator Brookhart

of

Iowa, aJld in

view

of the further

suits were recently breught in the

State

Courts of Iowa

against

Reserve Barik of Chicago and objections

to

the jur isdict ion were made

the

Jlederal Reserve Bank of Chicago both

on the

ground

that the

Federal Reserve

of

Chicago is not

doing

business}n the

State

of towa

and on the ground

that

was

not properly

served

on the

Federal

Reserve

Barik, I am confident that

intent of

this

bi l l i s

to

make i t possible

to bring suit against,

and to

obtain

of

process upon

any Federal reserve bank in

any State Court aQ1Where within

Federal Reserve District

served

by such Federal reserve bank.

As

soon

as this

bi l l was introduced I sent copies

to

Counsel

for

al l the

reserve

banks

and

requested

an

informal

expression

of

their

views

on

the

Wo

or

three of them

misunderstood

the purpose

of

~ ~ e bi l l , but those

understood i t strongly

opposed

ts ena.ctmant. Their let ters, however,

are

in

suitable

form

for

transmission

to

Congress;

and

opposition to

this

bill by

Secretary of the Treasury and by the Federal Reserve Board woUld have much more

opposition by the

Federal

reserve banks.

For

the

reasons stated

in the attached

le t ter , I feel very strongly

that

bi l l

should not

be

enacted and that

both the Boar·d

and the Secretary

qf the

should

go on

record

as

opposing i t s enactment.

I t

is

possible,

however,

notwithstanding this opposition the o ~ i t t e e

will

favor the

e n c t m e n ~

of the

·To cover this contingenby I have incorporated in the t t c h ~ d let ter recom

for

certain

changes

which shoUld be made

in

the

text

of

the

bi l l

and. •

recommendations

for additional provisions

restoring

to

the Federal Cou,:rts

urisdiction of suits by and tgainst

Federal

reserve banks where ~ h s u i t ~

actuallY

the

validity or

interrretat ion.. of any proTision

of

t.he FedeJ al

Reserve

Act

r the

Board

1

s Regulations, a.pd also a pro'V'ision exempting

the Federal reserve

the issuance o£ an: attachment, injunction

or

execution prior to

the

of final. jud&ment i

any

case. These amendments· would accomplish in part

purpose of

similar

amendm-nts reconunen.ded in the Board's las t .Annual Report;

this would seem to be a fEi,vol'able opportunity to recoumend the e n a c t m e J : ~ t

of

hose amendments as separate

oi l ls ,

and I baTe drafted the le t ter •ccordingly.

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X-6212

The statement w t ~ regard to the number of

State

Judicial

Districts

in

the United States is based upon reports

received

from Counsel to

various

Federal

reserve

banks

and

is.believed

to

be

fair ly

accurate.

t is neceS Sary that

three

carbon copies

of

the

attached le t ter

and

enclosures

be

furnished to

the

Secretary

of the Treasury.

n OM

Inclosures attached

Respect

fully,

Wa l ter Wyatt,

General

Coun.sel

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•

Honorable

Peter

Norbeek Chairman

Committee on :Banking and Currency,

United States

Senate,

Washington

D

C

y dear l::r Chairman:

X-6212-a

January 4,

1929 •

In accordance with the request contained in your le t ter

of

December

15th,

I

have

conferred

with

the

Federal

Reserve

:Board

and take pleasure in submitting

the following

report on S. 4662 a

bi l l to amend the Federal Reserve Act

with

respect

to

venue of

civi l

suits

against

Federal

reserve

banks.

t would

appear that

the general purpose of this bil l is

to make

t o s s i b ~ e

to bring suit against,

and

to obtain service of

process

upon any

Federal reserve

bank

in

any

court

anywhere

within

the e d e r a ~

reserve dist r ic t

in which stch

Federal

reserve bank

is

located. To this end i t provides

that

each

Federal

reserve

bank shall

be deemed to be an inhabitant of each judicial district within

the

g e o g r a p h i c a ~

l imite

of i t s Federal reserve

dist r ic t

and shall appoint

an agent upan whom process may

be

served in each

such

judicial district .

t is

not c l ~ a r however

whether i t is

intended

to refer to State

judicial dist r ic ts

or to

Federal judicial districts.

f i t

is

intended to refer to Federal

judicial

districts

i t would have l i t t l e effect;

because.

as explained Qn page 48 of the

Annual

Report

of the Federal Reserve Board

for the year

1927 since

the passage of the Act of

February

13, 1925 amending the Judicial

30

•

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~ 1

-6212-a u_

Code, the Federal courts have

jurisdiction

Jf

very

few

suits

brought

against

Federal

reserve

banks.

t

is

assunud therefore that

this

bi l l

is

intended to

refer

to

State

judic.J.al.

distr ic ts

•

If

so

i t s

con-

st i tut ionali ty is doubtful; because

i t

is

in

subE.tance an

attempt

to en-

large the jurisdiction of the State cour·cs and i t is doubtful whether

Congress

has any such

:power.

Assuming, however, that the bil l is intended to refer to

State judicial

districts

and

assuming that notwithstanding this fact

i t is

constitutional

i t

is

nevertheless

open

to serious

objections.

t would fai l

to

give recogn:

tion

to what should be considered to be

a

9rinci:ple

of law, namely, that a

corporation

not domiciled in a

cer-

tain

State can only

be

sued

in a jurisdiction within such

State

in which

i t voluntarily accepts service

or

in which i t is actually doing

business

and

w: lere

service

of :process

is made u pon

an

actual agent

or officer.

The disregard

of such a fundamental :principle would not

only

be unjust

to Federal reserve

banks

but

would subject them

to

serious inconvenience

and

unnecessary expense.

To

require

the

Federal reserve banks to defend numerouEjl :petty

sui ts

in local courts scattered t h r o u g ~ o u t

their

Federal

reserve

distr ic ts

would

necessitate

the attendance of officers and employees of

the

Federal

reserve banks as

witnesses and

the :production

of

their books and records

and would

very

seriously interfere with

the

:performance of their

important

:public

duties.

From an

inquiry

as to the number

of

State

judicial

distr ic ts

in

each

Federal reserve

district i t appears that this bi l l

would

make

i t

necessary

for the

Federal

reserve banks to appoint

approximately

104?

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-3-

X-6212-a

agents

whose

sole

purpose r.ould be

to receive service

of

process in suits

brought against

Federal

re.serve banks. This

alone

would be

an

unneces-

sary and

unjustifiable

expense to the Federal reserve banks. In addi-

tion

thereto i t

would compel

the Federal reserve

banks

to

defend

suits

in the most remote corners of

their Federal reserve

districts and to

retain local

attorneys

in such cases in addition to their regular coun-

sel

who now handle

practically l l

of

their litigation.

Moreover the

rights

of

the Federal reserve

banks in such

suits

would be prejudiced

by local influence and the

natural

inclination of rural juries

to

re-

gard Federal reserve banks\as

enormously wealthy

foreign corporations

instead

of

s e m i G o v e r ~ e n t a l institutions

created

solely for the pur-

pose

of

performing a

public service.

For

these reasons the Treasury

Department and

the Federal

Reserve Board are strongly opposed

to

the enactment of this

bil l or

· a:ny

other

bi l l

having

a

similar

purpose.

If notwithstanding these objections

your Committee

should

decide

to

report this

bi l l with

a recommendation for favorable action

i t is earnestly requested that the bil l be amended so as to clarify

i t s

provisions and so as to relieve to

some

extent the distinct dis-

advantages under which the

Federal reserve

banks

are

now

laboring as

pointed

out

on page 48

of

the

.Annual Report

of

the Federal

Reserve

Board

for the year

1927.

proposed

revised

draft of the bi l l

in-

corporating amendments which would be necessary

to

accomplish these

purposes is enclosed herewith and the more important amendments will

be

explained briefly.

he changes

suggested i ~

the text

of

the

bi l l

are

intended

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-4-

X-6212•a

to

make i t clear that the

bi l l

refers

to both

State and Federal judicial

distr icts and

that i t

is intended to affect the jurisdiction as well as

the venue of suits brought by or against

Federal

reserve banks. To

this

end

i t

\ : OUld

mal< e

such banks

citizens

of

the

States

in

which

their

head

offices

are

located and inhabitants

of each Federal and

State

ju-

dicial distr ict within the g e o g r p h ~ c l l imits of their Federal reserve

distr ict and would

provide

that they shall be deemed to be doing

busi-

ness in each

such judicial distr ict . I t is believed that these

prOvi-·

sions are necessary to accomplish the original purposes

of the

bi l l As

a

matter

of simple

justice

the

bi l l

would

also

be amended so

as

to apply

to

suits brought

by

Federal reserve

banks

as well

as

to

suits

brought

against them.

In addition to these amendments i t is suggested that there

be

added

at

the

end of the

bi l l

three

provisos which would

accomplish

in -:;>art the purpose of the recommendations contained on pages 48 and

49

of

the

Annual

Report

of

the

Federal Reserve Board

for

the

year

1927.

The f irs t

proviso would give the

District Courts of

the

United

States jurisdiction of al l suits brought by or against any Fed-

eral reserve bank which actually involve the validity or construe-

t ion

of

any

provision of the

:·Federal Reserve Act any amendment

there-

to or any regulation p r e s c r i ~ e d pursuant thereto

by

the

Federal

Re-

serve Board.

This is

clearly :in

accordance

with the policy of the

Constitution to have the

validity

~ d interpretation

of

Federal

s ta t -

utes passed upon by Federal rather than State

courts.

Adherence

to

•

this

policy

i s especially

important with

respect to

the

Federal Re-

serve Act because of

the

technical nature

of

i ts provisions and the

technical nature of the

subjects

with which

i t

deals and also

because

n -

u ~

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X-6212-a

of

the

unfortunate fact

that

the nature functions

and purposes

of the

Federal Reserve System

are not

generally understood y either tha

State

judges

or

the

lawyers

practicing in the State courts.

The

second

proviso

would

make

i t

possible

to

remove from

the

State

courts

to

the United States District Courts suits of the character

of

those

described

in

the

f i rs t

proviso

in

accordance with

the

pro-

visions

of

the

Judicial

Code

providing

for

the removal of

suits

brought

in the State courts

of which

the United States

District

Courts

would

have

original jurisdiction.

The

third

proviso

would exempt

the Federal reserve

banl{S

from

attachment injunction

or execution before

final

judgment

in any case

as national

banks

are now

exempted

under

the provisions of section

5242

of the Revised Statutes.

Such

an

exemption

is

clearly warranted

by

the

unquestioned

credit standing

o f

the Federal reserve banks

and their

financial abil i ty to pay

any judgment which may be rendered

against

them;

and

such

an

exemption

is

necessary

in

order to prevent the Federal reserve

bariks from being hampered

in the performance

of

their public duties through

the

issuance

of attachments injunctions or executions before final judg-

ment on

the merits

of

any

l i t igat ion in

which

they

may

be

involved.

s stated

above

both the

Federal Reserve Board and the Treasury

Department

are strongly o p ~ o s e to

the

enactment of

Senato

Bill

4652

or

any

other i l l having the

effect which this i l l

in i t s present

form

apparently

is

intended

to

have. Both the Board

and the Treasury

Department however

are in favor of the

enactment of i l ls

exempting Federal reserve banks

from

attachment injunction

or execution

before

final judgment

in

any

suit

action

or proceedinG and

restoring

to the Federal courts j ~ i s d i t i o n

over

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r::

-6- X - 6 ~ 1 2 - a

suits bz ought by and

against

Federal

reserve banks.

Separate

i l ls cover-

ing these subjects

are therefore

enclosed; and i t is requested that your

Committee

give

them

favorable

consideration.

Very truly yours

Secrutary of tho

Treasury.

Enclosures.

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t

)

)

L

(Revised Draf t of

S-4662.)

A BILL

X-6212-b

To amend the Federal

Reserve

Act, as

ameaded,

witn respect

to

venue

of

c iv i l su i t s agains t

Federal reserve

banks.

Be

t

enacted

by.

the

Senate and House of Representat ives

of the

United

Sta tes

of America

in Congress assembled,

That the

four th subdiTision

of

the four th paragraph of sec t ion 4 of the Fed-

era l Reserve Act, as amended, i s amended by adding

a t

the

end there-

o f the following:

For the purp9ses

of JuRISDICTION Alm venue of

c iv i l

I

sui t s BY

AliD against Fedelal reserve banks,

each

Federal reserve bank

sha l l be

deemed to

be a A CITIZEN

OF

THE STATE HT

WHICH

ITS

HEAD OF:i?ICE

IS

LOCATED AND

an

inhabi tant

of,

AND TO BE DOIUG B ~ H E S S IU, each

FEIER.AL AND STATE jud ic ia l d i s t r i c t with in the geographical l imi t s of

the Federal reserve d i s t r i c t

in

which such barik i s loca ted. The board

of

di rec to rs o f each such

bank

shal l

appoint , in each such j u d i c i a l

d i s t r i c t an agent

upon

whom process may be served. PROVIlll lD,

HOWEVZR,

THAT :HE

DISTRICT

COURTS OF THE

UlUTED

STATES SHALL HAV:C

JURISDICTION

OF

ALl SUITS OF A CIVIL NATURE AT

LAW

OR

IN EQ,UITY, BROUGHT

BY

OR

AGAINST ANY

FEDERAL

RESERVE BANK WHICH

ACTUALLY

UTVOLU

T:a ::i:

VALIDITY

OR. C01JSTRUCTION OF

ANY

PROVISION

OF

THE

EUDER.AL

rol$ RVE ACT,

ANY

AMJJND-

GliJT TE:ilRETO, OR ANY REGULATION

PRIDSCRIBZD

PURSUAHT

TEEETO

BY THE

FEDERAL RBSIJRVE

BOARD,

REGARDLESS OF

WHETFJER SUCH Q,tmSTION .ARISES FROM

TE3 PLEADINGS OF

THE

PLAINTIFF OR FROM lEFlllNs: lS INTERPOSED

IN

GOOD FAITH

BY TlB Di.ilFENDANT; PRq,VIDED, FURTHER,

TH.lf

ANY SUCH SUIT INSTITUTED IN

A STA'Eci COURT MAY

BE

REMOVED BY THE DEFEUDA1'T OR USFENDANTS INTO 'IRE

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-2-

X-6212-b

DISTRICT

COURT OF ~ r l U N I T ~

STATES FOR THE PROPJR DISTRICT

AS

PROVIDED

IN

CHAPTER

3

OF

THE

JUDICIAL COre

(UNITED

STATES

CODE,

TITLE

28, CHAPTER

3 ; AND

PROVIDED FURTHER,

TH i\ T

NO ATTACH?v:::NT, nrJUNCTION,

OR :illXBCUTION

SHALL

:BE ISSUED

AGAINST

ANY FEJBRAL

R3S:ERV:El :BAlm: OR

i f ]

PROPERTY

OF

ANY FEDERAL R'ESERVE :BANK :BEFOR'3 FIUAL JUDGl1::Jl1T IN

ANY

SUIT ACTION, OR PROCEEDil:TG HT

ANY STAT.mt

COUNTY,

1liDTICIPAL,

OR UNITED STATES COURT.

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X-6212-e

A :SILL

To

amend

section 4 of the Federal

Reserve Act and

for

other

purposes.

:BE

IT

ENACTED :SY

TEE

SElUTE AND HOUS?: OF REP

RESENTATIVES OF 1m

UJ:UTED

STATES OF AMmRICA IN

CONGRESS

ASSDi:BL.ED

That the Fourth subdivision of the fourth para-

graph

of section

4

of the Federal

Reserve Act the fourth

subdivision of Section 341, Chap. 3, Title 12, of the United

States Code)

be

amended to read as follows:

Fourth. To

sue and

be

sued, complain and

defend,

in

ny court of law

or equity; but no

attachment,

injunction or

execution, shall

be

issued

against

such bank

or ts property

before

final

judgment

in

any

suit, action

or

proceeding

in any State, county, municipal or United States

court.

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X-6212-d

A

BILL

To

amend section 12 of the Act

entitled An

Aet to

amend

the Judicial

Code, and to further define the

jurisdiction of

the circuit

courts

of

appeals and of the Supreme Court, and for other purposes ap

proved February 13 1925 and

for

other purposes.

Be

t enacted by the Senate and House of Representatives of

the United States of America

in

Congress assembled,

that

section 12 of

the

Act

entitled

An

Act

to

amend

the

Judicial

Code, and

to

further

define the

jurisdiction

of the

circuit courts

of

appeals and of the

Supreme Court and for other

purposes

approved February

13

1925

Section

42 of Title 28 of United States Code, be amended and r e e ~ c t e d

to read as follows:

Sec. 12. That no

district

court shall have jurisdic

tion of any

action

or suit

by or

against

any

corporation

upon

the

ground that t

was incorporated

by or

under·an

Act of

Con-

gress:

Provided

That

this section shall

not apply

to

any

suit

action or

proceeding brought by

or against

a

Federal

Land

Bank,

Joint

Stock

Land Barik,

Federal

reserve

barik

or any cor

poration

incorporated y or

under an Act

of

Congress wherein

the Government of the United States s the owner

of more than

one-half

of

ts capital stock.

•

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X 6 2 1 ~ e

December

19 1928.

ili.Ji iORANDUE FOR THE

FII..:.:S:

Subject: I ~ r

Ueed s vieYTS on S. 466.8.

Lr. reed

Counsel

to the

Federal Reserve :Sank

of :Boston

just ce.lled

me on

the

telephone and

advised me

that

he

is o·?-yosed to the

enactment

of S. 4662 on the ground

that

t

will

result

in

unnecessar¥ and

unjustif iable

incon

venience and

hardship

on the Federal

reserve

banks.

S)

Walter \:yatt.

m:-sad

40

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FEDERAL

R . ~ S : E R V E

B.A.L TK

OF N W YORK

December 12

1928.

Walter Wyatt

Esq., General

Counsel

Federal

Reserve

Board

Washington D C

Dear

Walter:

l-6212-f

enclose a copy

of the digest prepared

referring

to

S.

4662 copy of which you

sent

me with your

le t ter

of Dec-

ember 8. You

will recall

that showed this

digest to

you when

we were discussing the i l l in my

office

y e s t e r ~

Encl.

Yours

faithfully,

S)

Walter S. Logan

General Counsel.

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CORRESPONDENCE

fGDERAL

P ES::RVE

BANK

OF

NE' l; YORK

X 5 2 1 2 ~ f l

DATJ:

December

11,

1928.

________________________

S U B J E C T : F E ~ R A L LEGISLATION - PE1TDING

(Digest lTo

·1

- 70th Cong., 2nd session)

The following b i l l which

is of

in teres t to Fedel'al

Reserve

Ba;rlks

p ~ e n

~ i n t r o d u c e d :

465a,

introduced

by

Mr.

Brookhart,

December

5,

to

amend

Section

4

of

the

Reserve

Act

by adding

the

following provision a t the end

of

tha

fourth

of the fourth paragraph thereof:

For

the

purposes

of

venue of civil suits

against

Federal

reserve

banks, each Fedel'al

reserve

bank

shall

be deemed

to

be

an

inhabitant of each

judicial

dist r ic t

within the

geographical

l imits of

the

Federal reserve dis t r ic t in which such oank

is

located. The board

of

directors of each

such bank

shall appoint,

in each

such

judicial

district

an

agent upon whom

process

may be served.

At

the

present

time the

United States

Dtstrict

Courts

have no

juris-

over sui ts by or against Federal Reserve Banks except in cases in which

construction of

a Federal statute

or of

the

United States

Constitution

is

Jurisdict ion of

United

States

courts

over sui ts against

Federal

Banks cannot be maintained on

the

ground

of

Federal

incorporation or

on

ground of diversity of citizenship. Presumably, the purpose of the b i l l

to

permit sui ts

to

be

brought

against Federal

Reserve

Banks in

the

Federal

on the ground of

diversity

of citizenship. The s c o ~ e of

the

bi l l

is not

clear .

For example, under

the

terms

of the bi l l th is bank

;l:>e .a cit izen of

New

York, New

Jersey,

and Connecticut and t is not clear

a

Federal

court.

of

New ~ o r k

would have

jurisdiction

over

a

sui t

broueht

this bank by a cit izen

o{

New

Jersey. Moreover, the bi l l relates to

11

against

Federal Reserve f.nks

and

does not

appear

to

give

the Federal

any

addit ional r igh\s with

respect to sui ts brought by them.

'\

The

following b i l l s

h a v ~ also been

introduced.

. 4602,

introduced by Mr •

McNary, December 5.

R. 14940, introduced by t ~ · C:annon, December

6.

Both are

ent i t led

A

bi l l to es tab lhh a Federal Farm Boarcl. to aid

the ord.erly.marketing and

in the control

and disposition of

the

~ 1 J . I P l u s

of

commodities

in

~ n t e r s t a t e

and

foreign

·commerce •

•

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WILLIAMS

A.. ID SINnER

Attorneys

at Law

601 Commercial Trust

Building

Philadelphia.

December 21

1928

Wyatt

Esq.,

General Counsel

Federal

Reserve BQard

Washington

D.

C.

Mr.

Wyatt:

x s.212-g

We are

writing concerning Senate Bill

No.

4662

entitled A Bill to

Federal

Reserve Act as amended

with

respect to venue of civil suits

Federal

reserve banks .

t is our view

that

any legislation

intended

to determine definitely

the jurisdictiorswithin which suits may be brought against

Federal reserve

banks

n

the

Federal

courts

should

be

limited

to

such

provisions as

would make

Federal

eserve

banks subject

to

suit

only

in those Federal

judicial

districts within

are 1ocated their principal offices

or

branches. The Bill i f adopted in

i t s present form would go much further and make each Federal reserve bank sub-

ject to

suit

in

each

j u d i c i ~ · distr ict

within

the geographical limits of i t s

eserve distr ict

regardless

of the fact that

such

bank:

might not be

conducting

i ts business or operations

in

such

judicial

district

and

that

also

neither

i t s

I

offices or

branch m ~ g h t be located

therein.

t also

fai ls to give

recognition

to

what

should

be considered

to

be a principle of law namely

that

a

corporation not domiciled

in any state ·cari

only

be sued in a

jurisdiction

ithin such state in which i t

v · o l u ~ t a r i l y

accepts service or in which i t is

actually

doing business and service of proc.ess is

made

on

i ts

agent

or

officer.

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X-6212--g

We

do

not believe

that

the disregard of

such

a fundamental p ~ i n : c i p l e would

\

be warranted in v i ~ w o the :f ac.t that l i t t l e substantial advantage would

resul t to

those

persons bringing suits against Federal reserve banks inas-

much as the Eil l

should probably be

construed

not to - ~ p p l y to

sui ts brought

in State courts, where the great majority of

suits

against

Federal

reserve

More constructive resul ts

could possibly be accomplished

i f the

: ~ ; ~ s e r v e banks were made subject

to suit

. only in the judicial district in

which

their principal offices or branches are located, and were permitted

a t

their

discretion in the proper

jurisdictional

instances

to

rerJOve

sui ts

brought in State courts to the Federal courts on

the

sole

ground of their

Federal incorporation.

This

is

in accord with one

of

the

suggestions

contained

in your memorandum to the Federal Reserve Board under

date

of March 9,

1926.

OUr view must necessarily be based on theory, inasmuch, as in many

other

inatances;

the

absence

of

l i

igat.ion

in this

dis t r ic t

has not given

us

the benefit of actual experience

in

such matters.

We

should,

of

course, be

inf],uenced

by the views of

counsel

for

the

other banks Wh()se

districts

cover

t e r r i

tory

than the

~ f i r d

disti·ict

and whose

experiences

in actual

I·

l

iga.tion hs.ve brought ·home tf them more emp}latically the problems involYed.

i

· Apart, hor1ever,

f ro ; e i ~ opposed to

the principle upon which

the

\ ,.

;Bill

is

. ba.sed,

we believe

that

i t s adoption

' fOUld

not

only

resul t

in great

confusion

without any

substantial advantage

to. any

one class of

l i iga.nts,

would require judicial c o n s t r u c ~ i ) n ·at

the

outset.

The Act

woulQ,

seem to d i s ; r e ~ a r d

the

·fact

that

al l

Federal

judicial

.districts

are not Wholly

i.ncluded

within the

~ o g r a p h i c a l limits

of a:ny

particu ,ar Federal reserve distr ict - For instance, Pennsylvania is divided

44

; to

three F e d e r ~ l

judicial

districta,

the.

eastern,

middle

and

western distr icts .

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-3-

X-6212-g

~ e n t y f i v e

counties

comprise the western distr ict

of

which six are included

within

the Philadelphia

district

and nineteen in the Cleveland

district .

The

offices

of the Clerks

of

the

Courts

in

this

district

are

located

in

Pittsburg

and Erie neither of which cities l ies

within

the

Philadelphia

district .

A

question ·might possibly

arise as

to whether or

not

a Federal reserve bank

would

be considered an inhabitant of a judicial distr ict

part of

which only

l ies

within

the

reserve

district or whether the entire judicial distr ict

~ t be within the geographical limits of

the reserve district .

Furthermore

i f the western district

could

be said

to be

in

the

Philadelphia district for

the purpose of l i t igation

then

the

Philadelphia

Bank might possibly have to

defend a

suit at

Pittsburgh or Erie both of which would of course be out

of

i t ~ dietr ict . A similar situation might arise in

New Jersey

which constitutes

only one

Federal

judicial

district

but part of which l ies

within

the New York

distr ict

and part .in.

the Philadelphia

district .

The direction in

the

Act that

the

Board of

Directors

of each bank

shall appoint in each

judicial

district an agent upon

whom process may

be served

would in our opinion ~ inadequate and of l i t t l value in the absence

of

further

provisions

specifying the

manner in which notice of such appointments

shall

be

given to the public

and

SOfe limitation on

the

places

of

residence of the agent

appointed

for

accepting

s ~ r i c e

of

process

in

any

particular

district . As

you

know the State

Acts with \aspect

to service

of process

on foreign corporations

are always quite

explicit

in these

respects

and require

the

appointment of .

eillther the Secretary of

State

or some other public official as

agent

for the

acceptance of service of process.

In this district we have always consi.dered that the

Philadelphia

Bank

is

conducting

business only within

that

jurisdiction either

State

or

Federal

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X-6212-g

in which i ts principal t lf .iee is

located

and where l l of

i t s

operations are

carried

on, but of

course there has

been no

legislation for the

purpose

of

determining

this

point.

e appreciate the difficulties with which you are faced in •opposing

such l tgislation as

the

proposed :Sill but· feel decidedly that t should

not

be adopted in

i t s present

f o r ~

If we

can be

of ny help to

you

in this

respect

we

shall be glad to o so upon your request.

Very truly yours

(S) Williams and Sinkler.

EMS

46

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SQUIRE SANDERS

&

DEMPSEY

COUNSELLORS

T

L W

THE UNION TRUST

BUILDING

CLEVELAND

Walter

Wyatt, General Counsel,

Federal Reserve Board,

Washington, D. C.

Dear

Sir:

December 22, 1928.

X-6212-h

We acknowledge receipt of your le t ter

of

December

8, enclosing copy of Senate

Bill

No. 4662,

introduced

by

Mr.

Brookhart of Iowa.

We believe that this

is

objectionable legislation

as

i t will place each Federal Reserve Bank in

the

position

of

being

subject to the

annoyance

of

l i t igation

throughout

i ts

district

and will we

believe

encourage the filing of

suits on small claims. It will furthermore

restrict the

Federal Reserve a r i k ~

in exercising

the

right

of removing

cases

to the F e < i 1 z : a l ~ c o u r t s

except

in cases

involving

a

construction of the

Federal

Constitution or Federal laws.

Such

legislation

l i l l

also subject

the Federal Reserve Banks

to

attachment or

injunction 'before judga .ent or

final

hearing

Vie feel

that

·.if

passed

the proposed bil l should

at least contain

an amendment exempting Federal Reserve

Bariks

from attachment

or

from injunction except after judgment or

final

hearing.

Yours very truly

s tt D

(S) Squire Sanders &Dempsey.

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FEDERAL RESERVE BANK

OF RI HMOND

DecembGr 13, 1928.

Mr.

Wal

tor

Wyatt, Goneral Counsel,

Federal Reserve :Soard,

Washington,

D.

C.

Dear Mr. Wyatt:

Mr. Wallace

has turned

over

to

me

his

reply to

your let ter of December

8

aSking for

the

expression of views upon

the i l l

of Senator Brookhart

to

amend the Federal Reserve Act

with

respect to

venue of civil

suits

against

Federal

reserve

banks,

and am

sending

his

reply

to

you herewith.

My

own

opinion is that

Senator

Brookhart s

i l l

is too broad and would be likely to

subject

us to expensive and

vexatious

suits

in the different

parts

of

the

district

for

t r i f l -

ing ~ in cases which might involve a principle of operation.

d > not

thi:nk

this should

be the

case,

but

am inclined to

thi:nk

that

i t

would be

better

i f

Federal r s ~ v

banks were

regarded

as being present only

in

those parts

of the district

at which

the main office or branches are located.

Very truly yours,

S)

GEO. J. SEAY

Governor.

GJS-CCP

1

Encl.

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X-6212-.:;i-1

FEDERAL RESERVE BANK OF RICHMOND

TO

Mr.

George

J. Seay,

Governor.

FROM

I . G.

"iiallace, Counsel.

y

dear

Mr. Seay:

DATE

December 12,. 1928

SUBJECT Senate Bil l S ~ 4 6 6 2

with

respect

to Venue of

Civil

Suits against Federal Reserve

Banks.

I

hand

you herewith a l e t te r from Mr. Walter

Wyatt, General

Coul'lsel o the ·Federal Reserve :Soard,

to

myself, enclosing a copy of

the above

mentioned bi l l ·

which was introduced

in

Congress by

Senator

:Brookhart,

of Iowa.

You

will

see

that

the

object of

this

bi l l

is

to amend Sec-

t ion 4 of the Federal Reserve Act

by

providing that the several Federal

Reserve banks

shall be deemed

to

be

inhabitants

of each judicial

dist r ic t

in

their

respective Federal Reserve dis t r ic ts and that the :Board of

Directors of each

bank

shal l appoint a person

in each such

judicial

dist r ic t upon Whom process may be served.

Under the present law i t is by

no

means clear

whether

or not

a Federal

Reserve b ~ n k should

be· regarded

as present in every part

of

i t s

Federal Reserve dist r ic t and therefore. subject to civil

suits :Ln

Elach

state

of

i t s

dist r ic t

or

whether

the

bank

should

be

regarded

as present

only'

in the

state

in

which t has

a main

office

or branch.. The q u ~ s t i o n

has

ar isen several times in our experience. Upon two such occasio:q.s the

lower

courts decided that

we

were present and

doing business in

North

Carolina before

we

had a

branch

in

that

state, but in both of the suits

which I mentioned i t was never necessary to carry the case

to

an

appel

late court

as the

sui t was

decided

in otir favor upon

other

grounds.

In

a third case in North Carolina the same question was raised,

but t tat

case is

s t i l f pending.

·

From the

standpoint

of a lawyer,

therefore,

I can

sat

~ y that

a t

present

the

law

is uncertain and that an anendment which would remove

that

u n c e r ~ a i n t y

would be

desirable.

I

cannot,

however,

see

why

the

pro

posed bi l l

shoula.

require

an

~ t for· the

service

of

process in e ch

judicial qis t r ic t . I think that this means Federal judicial dist r ic ts .

In

this Fe'deral Reser.ve

_district

the judicial

dist r ic ts

are as follows:

One. in Maryland, two

in

Virginia, two

in

West Virginia, three in Nqrth

Carolina, alld two

in South

C a r o 1 i ~

The District

of Columbia

is

:n.ot,

s t r ic t ly

speaking,

a Federal:

j u d i c i ~ dist r ic t

but I imagine that within

the contemplation of this.

Act i t would be classif ied

as

a

judicial

district .

I can see no r e a ~ o n for the requirement of a

separate

agEint in

each judicialdistr: ict

because

the Federal courts have

no

jur isdict ion of

sui ts

by

and.

against

Federal

Ret:;erve

banks

unless

some

question of

Federal

],.aw is involved in that sui t other than

the

mere fac_t

that

the

baJ. lll;

is

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·-

,

•

..

50

-2--

incorporated

under

F e d ~ r a l

law.

t

therefor$

,seems to

me that i f

Congress

desires

to declare that

th.e

banks

shall

be regarded as

inhabitants

of

their

entire

Federal

Reserve distr ict ,

the

most

reasonable

requirements would be

the

appointment

of

an

agent

in

each

state

of

the

distr ic t

upon

whom

process

could be served in any suit brought in

the

courts

of

that state.

Whether. or

not i t

would be advisable to declare

the

Feder41.l Re- ·

serve

banks

i iable

to

service of

process

in al l

parts

of

their

distr ic t

or

restr ic t service of proc.ess to those states in which the banks have esta.b

l i s h ~ Q offices

is

of course a

matter of

public policy. There

are

certain

advantages

and

disadvantages,

however, in either case.

f we· are deemed an

'inhabitant

in e ~ c h state in

our

Federal

Reserve district , we may be vexed with

s u i t ~ ; ~ in r e m ~ t e

and

inaccessible

places; but·, upon :the other hand, we would be entit led

to

the

benefit

of

statutes of l imitation and

similar

statutes which apply only to

r e s ~ d e n t

defendants. Upon

the

other ~ n d . if. r ~ e

are.

resident .and

doing business

only in tho.se states

in

' ihich we. have established offices, we will be

relieved in

many cases of

suits

in inaccessible points in o'Ql'

Federal

Reserve district; but we 'f ill be s'Q.bject to attachment as non-resident· in

those

states in

which

we are

not d o i ~

business,

and when money or

p ~ p e r t y

is atta.¢led as that

of

a non..:.resident. su9h non-reside·nts are

not

usually

e n t i ~ l e d to

statutes

of limitation; and, also,

i f we

cannot be sued

in

states in which

we

have. n9.

offices, persons

who have, or think they

have,

ema:U claims against

u ~ wiil

be c o ~ e l l e ~ to abandon them .rather than to

tigat-e

them. .This might

• t

·.first .appear of

some

b e n e f ~ t to u s ~

but

the

:feeli:Dg

of

i r r i ta t ion

which would follow

from such a

condition

might

well

putweigh the ·s,.n.no, .nce which we .would s:u£fer i f we were sometimes

sued

in

:remote or ina,cees·sible points... .

MGW L

Very

truly

yours,

(S)

.M. G. Wallace,

Counsel.

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FEDllRAL RESERVE BA.l.1K

OF ATLANTA

Mr. Walter Wyatt, General Counsel,

Federal

Reserve

Board,

Washington,

D.

C.

Dear Mr.

Wyatt:

X-6212-j.

December

18,

1928.

We have your

l e t t e r

of

December

8, enclosing for

our

information a copy of Senate

Bil l

4662, introduced by

Senator

Brookhart

ttTQ

amend

the

Federal

Reserve

.Act,

as

amended, With

respect

to venue of civ i l su i t s against

Federal :reserve banks.

We do not believe that

this

leg is la t ion should

be enacted. I t

might

be advisable

to

so

am3nd

the Act

as.

to

provide that ,

for

the

purposes

.of v e n u ~ of c ivi l

su i t s

against

Federal

reserve bariks, each

Federal reserve·

bank should be

deemed

to be

an

inhabitant of the judicial

d i s t r ~ c t

witl:dn the:

geographical l imits of which i t s

main

of:t ie:e i s

lGC ate<d.. and

we would

see

no

part icular objec

tion.

to

a fri l l

providing that i t should also be

deemed

to

be an inhabitant of each. judicial dis t r i c t within the

geographical

l imi ts of

which

might

be

located

a branch.

Legisla t ion to

this

effeqt might place Federal reserve

banks iri:

the

cate&el7•

for ~ l l d i e t i o : D a l purposes, with

national bankEr;.

There

would seem to be. no reason, however,.

for

~ i n

a

Federal

reserve bank suable anywhere within

the geographical l i t j i t s of i t s Federal

Reserve Dis t r ic t

'

Such l e g i ~ l l a t i o n would

be discriminatory, unfai r

and uncal led for as

\we

see i t

Very

t ruly

yours,

RAliDOLPH PARKER

By

(S)

Robt. s. Parker.

RSP/w.

51

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X-62lp-k

FEDERAL RESERVE

EA NK

Oi '

CHIC

...

GO

MR. WALTER wYATT, General

Counsel,

Federal

Reserve Board,

Washington, D.

c.

Dear Mr. Wyatt;

CHICAGO Dacenher 12, 1928.

I received

your

l e t t e r of 8th

inst

enclosing copy of Senate

File

4662

which

is

a

ill

to

amend

the Federal

Reserve

Act

with respect to

venue

of c iv i l

sui ts against

Federal Reserve Banks.

In

your l e t t e r you ask

me

to give

you my views on

the Bil l a t an

Garly

date.

I am of the view that the

enactment

of this Bil l into law

would seriously

embarrass

the operations of Federal Reserve Banks. I t

is

a

well known

fact that

prejudice exists

in the minds of

a great many poorly

informed people

against Federal Reserve

Banks

and

their operations; and

i f

these people who have pretended grievances

against

the

Banks

were enabled

to ins t i tu te su i t in

any

court within the Reserve

Distr ic t ,

great numbers of

such sui ts are bound to be brought, many witho1 1t foundation, which will have

to

be unjustly

sett led or

defended against a t

ruinous

expense.

I

am

decidedly

of

the

view

that the enactment of

UCh legis-

lat ion would be a grave mistake and would in the

long

run very seriously

affect

the

operation of Federal

Reserve. Banks;

would especially

e m b r r ~ s

them in

the

performance of their

clearing

house functions and

would p l ~ e

upon

them a

useless, needless and

expensive

burden.

· In t h ~ c o n n e c t ~ o n i f there is to be

legis la t ion

affect:i,ng

the

jurisdic t ion of

q ~ u r t s

over

Federal

Reserve :Banks

I

should l ike

to

see

the Judiciary

Act amcfhded so as .to

restore to Federal

Courts jurisdic t ion

of

sui ts

by

and against

JFed .eral

Reserve

Banks on

account

of their

Federal

in-

corporation;

and

i f ~ h i s

la t te r

cannot

be

done

a t leas t

I

would

l ike

to

see

legis la t ion to

the

effect

that

the several

Federal

Reserve Banks

for junis-

dictional

purposes

mar· l ike national banks, be

considered residents of

the

state in which their

) r incipal office is

located.

And

while we are

on this subject, I

suggest

further

that

Federal Reserve Banks, l ike national

banks

ought to

be

free from attachment

prior to final judgment.

Vii

th

regards, I

am

Yours

very truly,

S) CHAS. L.

POWELL,

c ~ e ~

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FEDERAL RESERVE B Ali K

of

Mr. \:alter

· :ya t t

General Counsel,

Federal

Reserve Board,

Washington,

D. C.

y

dear liir

Wyattt

ST.

LOUIS

December

1 1 ~ 1928.

X-6212-1

I have

your letter of

12/B/28 and copy

of

Senate

Bill

S-4662

accompanying i t .

As you would naturally infer, as Counsel for one

of the Federal

Reserve Banks I hope

the

Bill referred to

will not

be favorablyreported out of the Committee on

Banking;

for,

i f reported out, i t would be popular

with

the

country

lawyer and

the

country

banker

whose

influence

as

vote getters

might have

considerable influence

on

the

votes of the

Legislators

When

the

Bill comes

up

·for passage.

The Bill,

i f passed,

would add

greatly

to

the ex-

pense

of the

Federal

Reserve Banks in

that

we

could

not

afford when we have a Jury. case) to go into

the

District

of the

Plaintiff and defend a suit without the employment

of

local

Counsel; and, even in equity

cases

or jury cases

tr ied

before

the Court,

i t

would be nearly imperative to

have some

local Attorney

to look after the

f i l ing of

plead-

ings

and

to attend

to informal motions and

the setting of

the case.

I f the bi l l b e c o r ~ s a law, we would have to defend

in

the atmosphere qf Court and Jury both, in most cases,

favorable to

p l a ~ n t i f f

Qur

Circuit

Court Judges

being

elec-

ted by

the

voters

of

the

particular district .

• I further fear that

the

enactment

of

the

bi l l

would

encourage

the

bringing

of

a g r e ~ t many suits of

doubtful

merit

for

the

purpose

of forcing

a

~ v m n t

in compromise rather than

to

be put to the xpense

of

defending a suit

at a. distant

point

having

in mind

the

gamble

against

us

in

having

to defend before

a Jury friendly

to the l lcal plaintiff .

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-2-

•

Having in mind that

i f

this bil l qecomes a law,

there

will

be one

introduced i f i t has not already

been

introduced

affecting

the Federal

Land Banks

in

the

sarr.e

way I, therefore, called in the

Counsel for

the Federal

Land Bank, and, without disclosing

to

him that you

had

sent

the bil l to me asked for his opinion as

to

how

i t

would

affect the legal

department in

the

Land

a n k ~ who

have even more

l i t igation that

would be

affected

by a

s i ~ i l r bil l

than

do the Federal

Reserve Banks. He

was

very

much

interested in

the

Bill, and,

suggested that

X-6212-1

he was personally

acquainted with Senators

Robinson

and

Carraway, and, that

i

either.of them were on the Banking

Committee, he would be very glad

to

do

what he

could

towards

seeing

that

the

Bill

was

not reported

out.

I

am fairly close to Senator

Hawes

of this District,

and, i f he is on the Banking Committee, I would

not hesitate

to go to

him

with

a view

of attempting to

have·

the

bil l not

reported

out of the Conmi

ttee. However,

neither

Counsel for

the Land Bank nor I

will

take any steps towards seeing these

gentlemen

until

I have

heard

from you. ·

Our troubles

in

Missouri

are already sufficient

under

a State statute which

permits substituted

service by

filing the suit in the District of the Plaintiff, suing out

summons and,

directing

the

local

sheriff

to forward

the

summons to the sheriff

of

the

District.

where

the

defendant

resides, and,

service

by

the la t ter sheriff, in

cases

where

the

cause

of action

.

arises in

the District

of

the

Plaintiff,

Fortunately not cases come w i t h i ~ the requirements of

this

statute.

Thanking you

for furnishing

me

the Bill,

I

am

Very

truly yours,

S)

Jas.

G.

McConkey

Counsel.

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•

X-6212-m

OF

l:iDillEAPOL IS

vh· ~ · a l t e r

Viyatt

Counsel Federal Reserve Eoard

Washington D. C.

Dear

Sir:

December 10, 1928.

I

have

your l e t t e r of the 8th with copy

of S.4662,

introduced

by Senator Brookhart.

I t is not clear. whether the words j u d i c i ~ l dis t r ic t in the

b i l l refer to Federal judicial

dis t r i c t s , .o f

which

there are

7 with-

in the l imits

of

Ninth D i s ~ c t or to State judicial dis t r ic ts of

which thoro

are

75 •. InasmuCh as the dis t r ic t courts of the United

States

since

the

Act

of

Feb.

13t

.1925,

have

not

jurisdict ion

of

civ i l

sui t s by or age.inst Federal reserve

banks

except v<hen

the United

States or an agent .tl::ereof

i s

plainti.ff or when

th6 matter

in contro-

versy

arises under the Consti tut ion or laws or

t rea t ies

of the United

States, I think the words judicial distr icts must be conetrued to

mean

State

judicial

dis t r ic ts •.

From

my

e x p e r ~ e n c e

as counsel

for

this

ba11lc the

past

14

years my OJ.Jinion is that t .Othing

coul.d

be more vexatious to the Fed-

eral

reserve

banks

than

t h i ~ proposed

amendment

to the Federal Reserve

Act..

This

bank

would.

have to

keep

agents in

75 judicial

dis t r ic ts ,

and sui t might be s tar ted

against i t

in any of the

dis t r ic ts , and

would

have

to be

t r ied

where s tar ted

.regardless of convenience or

expense with respect to witnesses or the records of th8 bank as

....

' - )D

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-2-

evidence.

A

suit

tnvolving

t r ~ n s a c t i o n s

0n the

Northern

Peninsula

of

Michigan

could

be started

in the remotest

jl .d5.cial

district of

Montana, and

vice

versa. t would have

to

be for quite a

large

sum i f

the

expense

of

defending

should noot

excoed

the sum

sued

for.

p to the present

time and my assistant at

the

Helena :Branch have

handled practically all

l i t igation but i f this bi l l

were

passed we

should not only

have to

travel

over a wide

terri tory but also

have

to employ

local attorneys.

I can

t ~ r i k ·

of

nothing

more conducive

to

vexatious l i t igation

or tending

more

to diminish the

Government's

share in the net narnings

of the

Federal

reserve ~ ~ s than the

proposed

~ n e n d m e n t

Yours

very truly

( S) A.

Ueland,

Counsel.

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FEDER L RESERVE B ~ l K

of

K NS S CITY

.Tanuary

5,

1929.

Hon. Walter Wyatt General Counsel

Federal Reserve

:Board

Washington D.C.

Dear

Mr

Wyatt:

X-6212-n

This

will

confirm my

recent

telegram

to

you

concenning

Senate :Bill

S-4662 which has

been

introduced

by Senator :Brookhart and which has

as

i t s

purpose

the

amendment of

the

Federal Re·serve Act with respect to

venue

of

civil suits against ~ e d e r l reserve banksn.

As stated to you in my

telegram,

I

see

no good

purpose

to

be served

by this bil l but on the contrary I

con-

sider that

i t

would be harmful to the Reserve banks •

As I read

the

bil l i t would

not

change

ihe

present status of the Federal

reserve

banks with

respect

to their

right to

sue or be sued

in

the

distr ict

courts

of

tne United

States.

The

right

to

sue

or

be

sued

in

such courts is , at all events, a

question

of jurisdiction.

The proposed

amendment does not

appear to affect

juris-

diction,

but

by

i t s express

terms

relates

solely

to the

venue of actions. In al l cases that might now be

brought

in the United States

district

courts against the Reserve

banks, the amendment would

very

effectively

fix the

venue

of such actions,

but to

y mind i t could not serve

the

purpose of creating a

jurisdiction

where the same does

not already

exist .

I t is

also

significant

that

the

place

of habi

ta-

tion is

fixed

as being in the judicial districts rather

than in the states which are embraced in

the territory

of

the

respective Reserve banks... I believe i t is

not

necessary to consider here whether an inhabitant of a

judicial distr ict is also

an inhabitant of

the

state

in

which such

distr ict

is located,

but

unless such

is

the

case, no diversity of citizenship could ever arise under

the terms of the amendment which

.could

give jurisdiction

to the United

States

distr ict courtJ? for as you well know

the requirement of jurisdiction

on the ground of diversity

of citizenship is that the parties be .citizens of different

states•

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-2-

I n

further

influenced in these views by reason

of the·follovring:

FIRST. The amendment is to

the l ederal

Reserve

Act

ra ther

than to the

Judicial

Code.

I f

i t

uere

the

in

tention to

make

the

Federal reserve

banks inhabitants of

the

seYeral

states in their respective dis t r ic ts for

jur isdict ional purposes, the natural

way

to

have accomp-

l ished that resul t would have been an amendment to the

Judicial Code by a

provision similar

to

that

which now

relates to national

banks.

SECOlm. The. word inhabi tant

is

used

rather

than ci

tizen

•

The provisions

of the

Judicial Code

which relate to

matters

affecting jur isdict ion

use

the

word

ci t izen

and

those

which

relate

to

the

question

of venue use the word inhabi tant

•

THIRD.

There is

no

r ight

conferred on the

Reserve

banks as

inhabitants of the

judicial dis t r ic ts

to bring

any

action in any of s·uch distr icts but

they

are made

inhabitants only

for the purpose of actions which

may bebrought against them.

I f

I am

not

correct

in

my conclusion

that the

amendment would not change

the

status of

the

Federal re

serve

banks

so far as their. right to sue or pe sued

in

the

United

States

dis t r ic t

courts

is

concerned,

I

s t i l l

feel

that

the amendment

i s not

a

proper

one. Itwould

permit the Reserve

banks

to be

sued

in United

States

courts

only in those

instances where the. party bringing

sui t

is an inhabitant of some state

other

than the states

embraced

in whole or in

part

in

the Federal

reserve dis

t r i c t

of the bank involved.

Actions of

that

kind

would,

of course,

be

·rare. and the benefit , therefore,

from

the

amendmant

would

be pract ical ly nothing.

I realize,

of course, that

you have analyzed the

effect

of

th is

proposal

more

closely

than

have been

able

to do

but unless

I have

overlqoked

something

in i t

I

see

nothing which

feel could

be

approved

by the

friends of

the System.

Yours very t ruly,

S)

B.

G

Leedy.

RGL:CR

7/17/2019 frsbog_mim_v30_0028.pdf


Law Office of

STROUD

AlTD RANDOLPH

American Zxchange Building

Dallas Texas.

Federal Reserve Board,

Washington;

D. C.

X-6212-o

December

17 1928.

Attention: Mr. Walter

~ y a t t

General Corinsel.

G-entlemen:

We

acknowledge

receipt of

your

le t ter of

December

8

1928,

enclosing

copy

of

Senate

Bill

4662,

the

same

being

a

bi l l

introduced by Senator

Brookhart providing

in

sub-

stance that the federal reserve

banks

shall

be deemed

in-

habitants of

each

judicial

distr ict within the

~ ~ o g r a p h i c a l

l imits

of the federal

reserve distr ict in which

such

bank

is

located.

In some respects this bi l l

ap-:?ears

to

us satisfac-

tory that

is

to

say

we have

no objection

to a

federal

reserve

bank

being

deemed

an inhabitant

of

the

federal

reserve

distr ic t

in

which

i t

is located

nor

do we

have any

objection to

a fed-

eral reserve

bank: designating

e.n agent

in

each portion of i t s

distr ic t

upon which

service

might' be

had :provided the

bi l l

should go further than

i t

now

does

and

provide that federal

courts

be given

jurisdiction of al l

suits

involving federal

reserve

banks.

t

seems

to us that the introduction of this bi l l

gives good

opportunity for the federal

reserve banks

to

raise

the last mentioned question.

We

notice that the bi l l

has been

referred to the

Banking &

Currency

Committee

and we are

wondering

whether or

not the matter could not be called to the attention

of

Sene.tor

Glass and perhaps

worked

out

so

as to

renew

the

jurisdiction

of

federal

courts.

\Ve

do

not

feel that the

law

should permit

federal reserve

banks

to be sued in

state

courts located any-

where

within

the federal reserve district for many reasons with

which

you

are familiar.

ur

Mr.

Stroud

has

several matters in

Washington which

are

in need

of attention and he

.

is at

present

planning

to make a

~ r i p to Wasl:l.ington sometime in Janu.a.ry. If he

can

be

of

any

as-

sistance to

you

in connection with

this matter please

advise.

Jil BS ;lm

Yours

very

truly

(S) Locke, L o c ~ e Stroud

& Randolph •

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Walter

l . yatt,

Esq.,

General

Counsel,

Federal

Reserve :Boardi

Washington, D.

C.

OF SAlT FR.iJ TCISCO

X-621.2-p

December

18,

1928.

This i s

in

reply to

your le t te r of

~ c e m e r

8i 1928 in

which you enclose

a

copy

of Senate :Bill Uo. 4662 introduced

by

Senator

Brook. lart

and relating to

venue

in civil suits against

Federal

reserve

banks.

I

am frank to

say

that

am somewhat

a t

a loss to know

what the intent of

the :Bill

is ;

that

is, whether

i t

is il1tended to

affect jur isdict ion in

suits brought .against

Federal reserve

ba11ks

in s tate courts, or whether i t is

intended

to affect Federal juris-

diction. I f

the

l a t t e r

is the intention, I

cannot

see

that the

measure

will be Gffecti ve

for the uurnosc for which

i t is intended

•

.

...

:By the provisions of

Section 42

of the

Judicial

Code,

Fed-

eral courts

arc

deprivad

of

jur isdict ion in actions or sui ts by or

against

any corporation

whore

jur isdict ion is

predicated

upon

the

ground

that

the

corporation

was

organized under an

act

of

Congress.

This section undoubtedly

deprives

tho FederaJ. courts of

jur isdict ion

in suits by or

against

Federal

reserve banks where such jur isdict ion

i s predicated upon

Federal incorporation

and

not upon

the

theory that

the

action

involves an

interpreta t ion

of the consti tut ion or laws of

the

United States.

FEDER L

L ND

EA.'ti K vs. Ul l

TED

STATES N A T I O l ~ A L

~ T K

13

Fed.

(2nd Ed.)

36.

This

being

the

case,

Senator :Brookhart

• s :Bill

would 11ot in

my

opinion

change

the

si tuat ion

or

confer

jur isdict ion

upon

Federal

courts

where

i t does not

now exist .

GO

If

on the other

hand, the

Bil l

is

intended to

subject

Federal

reserve banks to

the

jur isdict ion of a l l

state courts

within the

respec-

t ive

Federal reserve dist r ic ts I

consider the :Bill an unfair measure

and

one which

should not be

enacted into the law. The purpose of the proposed

legislat ion is

Q.oubt1ess

to avoid the effect of such decisions as that

rendered in

the case of :BACON

vs. FEllERAL RESERVE :BAl iK:,

289 Fed. 513 •.

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-2-

X-6212-:p

The effect

of the proposed legislation

would be

to

subject

a Federal

reserve

bank: to

suit

in any state court 1\ i

thin

the geograph

ical limits

of

the

distr ict

within

which

the

bank:

is

located;

whether

or not t

was

judicially held that

the bank: was doil1€ business

with

jn the

state under

the terms ~ the state

statute. In

a district the

size of

ours, comprising

approximately 20

of the area

of the

con

tinental United

States,

the proposed legislation, conferring juris

diction or fixing

venue

at

any

judicial district within the area,

would

result in

great

hardship to

this bank.

~ e have

five

branches, located at Seattle and Spokane

Washington;

Portland,

Oregon;

Salt

Lake

City,

Utah; and Los Angeles

California.

The distance from Seattie

to

our

head

office is

956

miles;

from Salt Lake City to our head office 818 miles; from Spokane

to

this

office

1149

miles.

This

district

is

a p p r o ~ i m a t e l y

1600

miles

in

length and approximately 1000 miles

in width.

I have no doubt

that

we are subject to suit

within

the judicial distr ict w h e r ~ these bra:1chcs

are located, but legislation

which Would

subject us to the

inconvunienco

nd

expense. of responding to a

suit brought

in Arizona

or

Nevada

in

which

we

have no

branches

and with which our business

is

t r ~ s a c t e d entirely

by

mail,

would

certainly

be inequitable and unfair.

The proposed legislatt.on would moreover involve

the

appointinc;

in each judicial district of each state, an agent upon whom process

might be served.

In many of the

judicial

districts

embraced

within

our

area

we

have

no

local

8bent

and would be

forced

to

aypoint

for

this

pur

pose an officer of some member bank.

In

cases such as these, the agent

not being familiar with

our

transactions or practices,

would be

at

a

serious

disadvantage and might very

easily

so conduct himself

as to

jeopardize the best interests of the Federal reserve bank.

Federal reserve

banks

are already suffering

under

several

serious legal

disabil i t ies with

which you

are

familiar and of which

strongly feel they should be relieved. I can see

no

need for the addi

tion

of

the

burden proposed by Senator Brookhart and

believe that every

effort should

be made, to

defeat

the Bill.

ACA/SW

Very

truly

yours,

5) A. C. Agnew

Counsel.

frsbog_mim_v30_0028.pdf

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